Streams

New Jersey Kicks Tesla to the Curb

New Jersey's Motor Vehicle Commission adopted a new rule banning the direct sales of automobiles in the state—delivering a blow to electric vehicle manufacturer Tesla.

On Tuesday, the NJ MVC adopted a rule requiring auto dealers to have a franchise agreement with an automaker in order to sell cars in the state.

Tesla, however, doesn't use dealers—its stores are owned by the company. Tesla maintains that because it's introducing a new type of vehicle to consumers, the company needs to be able to communicate directly with consumers. (Another factor: the company manufactures 21,000 cars a year—not large enough to support a dealership network.)

The new MVC rule takes effect April 1.

Kevin Roberts, a spokesperson with Governor Christie's office, indicated the state's move was not a surprise. "Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law," he said. "This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation and Tesla has been aware of this position since the beginning."

But Tesla said it had been negotiating with the state and complained the company had been blindsided by the decision. “The statute in New Jersey plainly allows Tesla to be licensed to sell cars there,” said Diarmuid O’Connell, Tesla's vice president of business development. “The Motor Vehicle Commission has licensed Tesla under that statute ever since October 2012, and any suggestion that Tesla was told ‘since the beginning’ about any problem with its ability to be licensed there is false."

The company followed up with a blog post calling the MVC's decision "an affront to the very concept of a free market."

There are two Tesla stores in New Jersey malls—one at the Garden State Plaza in Paramus and one in Short Hills—as well as a service center. All told, Tesla employes 27 people in the state.

Texas and Arizona are the only other states to have banned the direct sales of cars to consumers.

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